Inflation
The rate at which the general price level of goods and services rises over time, reducing the purchasing power of money.
Inflation is the silent tax on cash. At 3% annual inflation, $100 today buys only $74 worth of goods in 10 years. Central banks typically target 2% inflation as a sign of a healthy economy — too low risks deflation and economic stagnation, too high erodes savings and creates uncertainty. For personal finance, inflation means that money sitting in a zero-interest checking account is losing value every day. Your investments need to earn at least the inflation rate to maintain purchasing power — this is why the "real return" (nominal return minus inflation) matters more than the headline number. Assetli's inflation calculator shows how inflation impacts your savings and purchasing power over time.
Example
At 3% inflation, your $50,000 salary needs to grow to $67,200 in 10 years just to maintain the same purchasing power. Groceries costing $150/week today would cost $202/week.
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Related terms
Compound Interest
Interest earned on both the initial principal and the accumulated interest from previous periods, creating exponential growth over time.
Interest Rate
The percentage charged on borrowed money or earned on deposited/invested money, expressed as an annual rate.
Savings Rate
The percentage of income saved or invested rather than spent, widely considered the most important factor in building wealth.
FIRE (Financial Independence, Retire Early)
A financial movement focused on aggressive saving and investing (often 50–70% of income) to achieve financial independence and the option to retire decades earlier than traditional retirement age.